ECON 003 Lecture Notes - Lecture 7: Diminishing Returns, Marginal Product, Marginal Cost
Document Summary
Chapter eight: costs and the supply of goods. Residual claimants : individuals who personally receive the excess of revenues over costs. Have the incentive to increase revenues or reduce costs. (1) contracting : using outside producers for specific tasks. (2) team production : where employees work together under the supervision of the owner (or owner"s representative) Shirking : working at less than the expected rate of productivity. Principle-agent problem : the incentive problem that occurs when the purchaser of services lacks full information about the circumstances faced by the seller can"t know how well the seller performs the service. (1) explicit costs : the payments a firm makes to purchase the goods and services of productive resources. (2) implicit costs : the opportunity costs associated with the firm"s use of resources that it owns. Ex: foregone interest, foregone rent, foregone wages. (3) total costs (tc) : the costs (both explicit and implicit) of all the resources used by the firm.
